Ukraine’s tax system has been turbulent. It is afflicted with corruption exacerbated by convoluted laws and procedures. It is governed by extremes — large-scale evasion and small-scale enforcement overkill.

Add it all up and, despite Ukraine’s reasonable tax rates, the administration of government revenue collection presents a barrier to greater economic development. According to the Business Ombudsman Council, nearly half of all complaints they receive are tax-related. Specifically, companies had problems with value-added tax refunds and heavy-handed criminal proceedings initiated by the State Fiscal Service.

Having a good tax lawyer, consequently, is as important as having a good accountant. This is where Alexander Minin, a senior partner at Kyiv-based KM Partners law firm, comes into the picture.

Most of his clients are large companies with foreign capital that have been operating in Ukraine for a long time. He helps them assert their rights. On the bright side, he said that he’s detected an improvement in tax administration in recent years in Ukraine.

Overpaying taxes

Many of Minin’s clients have been trying to get reimbursements on income tax payments they made in advance before 2014. Companies were charged based on profits of the previous financial year. But when Ukraine’s economy went into recession in 2014, many companies found out they overpaid taxes.

“It’s not that easy to make the government return money, but we manage to, even if it’s not the full amount,” Minin says. “Sometimes it’s sufficient to file a lawsuit, and the fiscal service decides to return overpaid taxes without waiting for the judgment.”

Myroslav Prodan, the interim head of the State Fiscal Service, told lawmakers on June 20 that the tax agency is working on refunding overpayments. Ukraine now has the money to do so, thanks to a rebounding economy and the elimination of some tax-evasion schemes. Tax collections in the first quarter of 2017 exceeded last year’s period by Hr 6.4 billion ($246 million). (Ukraine, from all sources, raises and spends about $40 billion annually in its state budget.)

Tax inspections

Another issue is law enforcement agencies that abuse tax inspections. It is common in Ukraine for prosecutors to file requests to courts for permission to conduct inspections to investigate possible tax evasion.

Minin believes that is wrong.

“Once a court, with a single order, allowed tax inspections of over 1,000 companies. Can you imagine?” he exclaimed. As a rule, he said, they are fishing expeditions with little or no prior evidence of tax evasion.

The statue of Lady Justice Themis on April 5 at the Supreme Court of Ukraine in Kyiv.

The norm that allowed law enforcement to conduct fiscal inspections as part of a criminal proceeding and by court order was removed from the criminal procedure code several years ago, but it remained in the tax code.

“We pointed at this defect to the courts, and in many cases we managed to get fiscal inspections overruled,” Minin said. “Our most recent internal statistics show that in a third of cases when law enforcement and tax agencies turn to courts for permission for tax inspection, judges decline, saying there’s no grounds for it.”

Helping courts

Minin is also involved in Ukraine’s tardy but much needed judicial reform. He was an author of examination questions for the High Qualification Commission of Judges of Ukraine, which is helping to select a new Supreme Court, expected in July. He said that courts have, in the past, ruled to protect the state budget in disputes involving private companies. More judges today, he said, are willing to give both sides a fair hearing.